Fraud Prevention Strategies in Local Government

Tabled: 6 June 2012

Each year, local government collects $7
billion in operating revenues, expends $6 billion, and manages
assets with a total value of $60 billion. These significant
resources are at risk if councils are not active, vigilant and
effective in dealing with the risk of fraud.

This audit assessed the effectiveness of
fraud prevention strategies at a selection of councils.

The examined councils do not effectively
manage their exposure to fraud risk as none have developed a
strategic and coordinated approach to controlling fraud. This is
concerning given the significant value of the public funds and
assets they manage.

While each of the five councils has aspects
of a fraud control framework, critical elements are either absent
or poorly implemented. Risk-based fraud control plans do not yet
exist at all councils. Coupled with inadequate monitoring of the
fraud control framework by management and audit committees, this
shows they are not sufficiently vigilant nor effective in dealing
with the risk of fraud.

Without a risk-based fraud control plan
there is no formal basis to assess whether fraud strategies are
soundly based, coordinated, purposely implemented and reviewed.

These shortcomings increase opportunities
for fraud and thus put councils' reputations and limited public
funds at risk.

Consequently, the examined councils cannot
be assured that their fraud prevention strategies are effective and
that all major fraud risks have been adequately mitigated.